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The US government through the FED is the currency issuer. In this situation the US governments debt is not actually debt as we commonly understand it, but is more realistically just a record of additional money issued into the economy. The FED can create money out of thin air if it so chose and does not need to borrow from anyone to fund US government deficits. Currently bonds are issued to fund the US governments deficits but this need not be the case. Doubt the existence of created money? Quantitative easing uses created money to buy pack government bonds from banks and other financial institutions.

Even with bonds, when the interest rate on bonds is about the same as inflation, there is little or no true interest expense. As bonds mature they are merely replaced with more bonds. This so called federal government debt does not and should not ever be repaid.

For an economy to grow the money supply must grow by a commensurate amount otherwise growth will stagnate. How does the money supply grow - through federal government deficits.

To the worried libertarianists, monetarists or classical macro-economists reading this, such deficits are indeed good for the economy and these additional funds can be used for additional government spending or tax cuts. Balanced federal government budgets on the other hand are inherently contractionary and surpluses even more so.

How big should deficits be? No larger than the ability of the economy to grow and absorb that money, excessive growth in the money supply will be inflationary. The ideal deficit could settle to be about 5% of GDP but could be much higher or lower depending on the level of unused economic capacity. The aim should be to keep involuntary unemployment and underemployment down to frictional levels (people moving between jobs).

Deficits act to increase consumption which is the best driver for worthy long lasting growth that increases employment, increases taxation revenue and reduces welfare support costs. This is nothing new. Keynesian stimulus was the modus operandi throughout the Western world from WWII till the 1970's and 80's when Milton Friedman and others convinced the world to go down the disastrous neo-liberal path.

State and local governments, businesses and individuals are not currency issuers so their debt is as we conventionally understand debt to be, so must be managed prudently so that interest or repayments of principal if required, can be met.

Sceptical, educate yourself and learn about the modern monetary theory economists:
https://www.youtube.com/watch?v=JGuNpqYBkZk
https://en.wikipedia.org/wiki/Modern_Monetary_Theory

Even the libertarianists are learning about MMT:
https://beinglibertarian.com/mmt/

There's hidden ideology in this article. The US government doesn't face interest rates from the market, it sets them via the Fed. Or rather that's what the ideology is about, perhaps implying that the US and other states *should* face market rates. That's part of an ideological wind that's already taken hold in the Eurozone and destroyed it.

Rogoff doesn't understand that he is digging a big hole. Instead of having the intellectual honesty of admitting his views of the world make no sense, he keeps at it again and again.

Please think Mr Rogoff, when interest rates are normalized (whatever that means), it means monetary traction will be achieved and economy growth is on path, deflation is gone, etc..At that time the US Gvnmt can simply deleverage

"abrupt normalization of interest rates" ? Huh? Normal to whom? The interest rate will be what the Fed wants it to be, no more and no less. "short term borrowing has saved the government money as well" - so the sole source of US dollars in the world has to save them? Perhaps Mr. Rogoff should go back to trying to determine the exact location of that fiscal cliff he's trying to get everyone to worry about.

In 2016, the Feds have budgeted for interest payments amounting to 1/4 of that of total spending on Social Security. As the author points out, the average duration is 3 years, which would be about 1% interest. If the Feds would raise short term rates by 1%, the interest payments would be half of what is paid out to Social Security. Go back to 2006, and the 5 year note was 4.3%, which would cause interest payments to equal Social Security payments. The conclusion is that rates can't go up, and duration must stay low. Finally, since the debt continues to increase, this will get worse even if rates and duration don't change from where they are now. " Well , here's another fine mess you've gotten us into " - Laurel of Laurel and Hardy.

Wow economics has really lost its way when it forgets that it's a human construct and hence should be doing what's best for the whole population. Japan is issuing 10 year bonds at negative rates with no shortage of buyers. The USA can do the same of it wants to but instead it should stop issuing debt. How can you have an IOU to yourself for your own IOU's? Thankfully most of the early top commenters understand the gold standard is long gone!! The only limit to spending is available resources and inflation not some magic deficit %.

I agree with Dr. Rogoff. No business or individual would pass up the opportunity to lock in the low long term rates unless the debt could be extinguished over the next few years. Five years from now the gov't will regret not taking advantage of these low rates.

Economists in general and Kenneth Rogoff in particular look at things through a very narrow lens. A broader lens would include consideration not only of the cost of the debt but the value of the use of these funds to do things of value. There is a huge need for investment in order to make the socio-enviro-economic performance of the USA and the world more efficient so that there can be a better quality of life for everyone and reduced degradation of the environment. Finance facilitates matching real resources with real needs ... it is not not an end in itself. Sadly and dangerously, monetary economics has no substance, but for all that it can result in massive damage to the lives of real people.

Has the US returned to the gold standard? If they haven't, this column is ridiculously wrongheaded. Perhaps economics as currently practiced is like astrology and alchemy, pseudosciences providing the basis for sciences like autonomy and chemistry. I hope the evolution happens soon, reading this sort of stuff is becoming tedious.

As Rogoff says the chances of a steep climb in rates is very small. He has to mention a major war to justify his claim they are not trivial. One can agree with his general premise about the need to bulk up some more on long dated debt but we're almost certainly in for a prolonged period of low rates.

US Treasury debt management is anchored in two principles, designed to achieve lower cost of borrowing:
(1)Regular and predictable issuance to entice more investors to participate in its weekly auctions.
(2) Provide enough securities across its yield curve to ensure liquidity of its products, that is, allow investors to buy and sell in secondary markets with low transaction costs. Rogoff's proposal will violate both principles and fail to achieve low borrowing costs over time. This space for comments is too short, so Rogoff should read Garbade"s book to understand how Treasury's debt management works, https://www.newyorkfed.org/medialibrary/media/research/publication_annuals/treasuredebtbook_tbd_2-05-16pdf.pdf?la=en

There is an incredibly big mistake in just the FIRST sentence. The rest of that paragraph is equally wrong headed, Just appalling for a Professor of Economics!
The US government is MONETARY SOVEREIGN. Therefore it has zero need, zero obligation, to borrow [it is it's own money!!!] It buys its debts. It does not have to store/save money to buy debt. It can always and at any and every time create payments in the Fed to settle its debts, and no interest will ever be due.

Unfunded liabilities do NOT EXIST. There is no such thing. Are we paying today for past social liabilities already spent? No, and we can buy any future debts at a future date with no obligation. This is what being monetary sovereign means!

It's not without provisos. Money creation [aka printing money] can only be done if something, like a war or a pension, is for sale. If there is no debt, there can be no money created.

Refinancing debt to longer maturities and today's current rates makes fundamental sense. When interest rates go up in the future (normalize), then the market value of the debt will be cut significantly.

Prof. Rogoff writes about "the quack idea that the level of government debt is basically irrelevant and should never be an obstacle to maximizing public spending." Did he tell that to Reagan who said the deficits don't matter? Oh yes, deficits don't matter if they are do to tax cuts for the rich, but do matter greatly if due to spending for the poor.

Neoliberalism just won't be satisfied till it kills all the worlds poor with austerity. Europe may have higher unemployment, the US has much higher poverty. Which is more worthy of spending? And your debt argument is false. You can't go broke on fiat currency. But I suppose if you had figured that out you would have also figured out that private debt has maxed out and that is why we have stagnation. But who cares about the debt slaves? Kill them off soon enough, if they don't revolt ad elect a "crazy" candidate first. Funny how Laissez Fair always leads to a Gilded Age which always leads to Fascism.

Inflation is the real reason for pushing out debt maturity. If the US sold $4 trillion debt with 10 and 30 year maturities inflation will naturally decrease the interest rate of those bonds down int the area occupied currently by three year debt.

Personally I believe this is the way the economy has always operated up until now. We know the system is rigged and our future opportunities were sold to the highest bidders years before we were born, that is the nature of the global economy. The public are tuning out and withdrawing into technology. We no longer respect the "experts" as they are the elites messengers and listening to their opinions only spells doom.

There has been talk about 'the need' for infrastructure investments for years now. So far no one has convinced Congress that a prudent, long term plan to invest in improving our roads, bridges, rail lines, educational facilities, etc merits serious consideration. Even at today's very low interest rates most elected reps in DC cannot see past their immediate concerns...how to get re-elected....to make these kinds of sensible decisions. Even with its 'strong recovery' the community I live in here in Calif continues to have very poorly maintained streets and school buildings that are an embarrassment, if not in some cases a hazard, to the well being of the students and staff.

It seems a very odd argument to propose pushing debt further and further into the future - which is a fixed outcome - whilst at the same time saying future policy reactions depend on circumstances - which by definition are unknown.

BTW in Europe the availablity of debt is being used to procrastinate on structural reform, hence it follows that de facto proposing more debt does not resolve anything

One major disconnect: If you ask an economist from an Ivy League college or one employed by a fortune 500 company whether there is a solid recovery, they will unanimously say "YES!". On the other hand, if you ask the average person on the street, they will say "NO!!!".
Why? Well, first, there is the fact that the average worker's wages have not just stagnated but decreased over the last 10 years. Second, the local factories first began dumping long-time employees and using temp services to hire young, cheap foreign labor from Mexico, then just closed down and moved to Mexico. Third, while the official CPI is extremely low, because our new cell phones, computers and TVs are so much better that, even though the price today is much higher, the CPI says they are really much cheaper because they are so much better. But the truth is that almost ALL of our everyday expenses are MUCH higher than the CPI. According to the CPI, prices have risen 43% since 2000. However, Gasoline was up 400% for years, and is still over twice as high as it was in 2000, rent is up almost 100%. A pound of cheap bacon was on sale at Kroger for 99 cents in 2000. Today, the same brand is on sale, 12 ounces for $3.49. Hamburger meat has risen from 99 cents to $3.99 per pound. My water bill has increased 400%. Power, heating oil, pretty much every single necessity has risen by much more than the official CPI. All of those tech improvement adjustments are really screwing up the CPI, making it much lower than the real increase in the cost of living. Meanwhile, the economists keep pushing studies that show the US economy to benefit greatly by importing massive quantities of cheap foreign labor, all of which begin by stating that all of the cheap foreign labor is good for the US workers, because they will have different skills than those already here, and will therefore start new businesses and create new jobs for US workers. Which is not true, as unskilled labor is pretty much interchangeable, and seldom creates jobs, and therefore makes all of those studies completely worthless in anything outside an academic setting, or corporate boardroom where the objective is to cut labor costs any way it can.

Remark on one paragraph in the article: Responsible action is to fix our tax and spending problems now, not to wait until the train is about to jump the tracks.
-- This is while noting that quite a few people think that income and wealth inequality in this nation are worse problems. I note that current and proposed policies won't fix inequality.

Knocking Trump won't make the current and past Economist egg heads, like you, seem smarter...in fact it shows disdain for the voice of the silent majority off workers who probably will surprise everybody by their vote in November.

With $20 trillion of national debt, a 3% increase in the average interest rate would require $600 billion more in debt service each year which is more than the discretionary budget for the entire US government. Let's hope we don't have some black swan event.

Precisely. A clear statement as to why it makes sense to extend the duration of that $20 trillion while rates remain historically low. I would certainly not advocate adding to that total indebtedness but it does make sense to lock in the low borrowing cost.

Since when did it become a good idea for the US to copy the economic policies of Spain, Ireland, Belgium or Mexico?A better solution is to deal with the inequality in our economic system and fix it, even though it may ruffle the nose of the elites.

Carmen and Ken of course wrote the book on this sort of situation, and it's refreshing to find an American economist whose first instinct isn't to sprinkle every issue with the fairy dust of magical 'growth'.

You don't take into account that the government is an illiterate debtor. Sure, a smart investor would lengthen maturity at low rates and put his/her financial situation in order. The illiterate government would think "free money" and gets itself into more trouble by increasing its borrowing.

More debt will further increase inequality in American society. It will not take too much for wealth transfer conveyer (banks, offshore, state contractors) to transform state (citizens) debt into top 1% equity. It may be a solution for the curent elites to avoid real changes and the outcry of the society in the form of so called POPULIST leaders without implementing reforms that may require to transfer some of the economic bienfit frome the top to the bottom. Proposal looks like trying to save a ill person by continuously making blood transfusion without trying to cure the cause of the blood lose.